Digital Realty partners Mapletree Investments on $1.4bn data centre portfolio
Digital Realty has entered into a definitive agreement with affiliates of Mapletree Investements and Mapletree Industrial Trust for the sale of a portfolio of 10 data centres.
In addition, to the 10 Powered Base Building data centres, the deal also includes the establishment of a joint venture on three existing Turn-Key Flex hyperscale data centres worth a combined total of $1.4 billion.
"We have deepened our presence in the fast-growing data centre sector with our second portfolio acquisition in North America,” said Hiew Yoon Khong, group chief executive officer of Mapletree Investments. “These transactions add high-quality properties in key data centre markets underpinned by global cloud and colocation players. Our strategic collaboration with a leading global provider of data centre solutions like Digital Realty will enable us to scale up meaningfully in developed economies for this resilient asset class."
Under the terms of the agreements, Mapletree Investments and Mapletree Industrial Trust will acquire the Powered Base Building portfolio from Digital Realty for a total purchase price of approximately $557 million. All 10 properties are fully leased and predicted to generate a cash net income of close to $37 million in 2020, representing a 6.6% capital rate.
"The proposed transactions will enhance the sustainability of our returns to Unitholders with the increased freehold land component and long leases with embedded rental growth,” added Tham Kuo Wei, chief executive officer of the manager of Mapletree Industrial Trust. “This transaction and partnership with Digital Realty mark another significant milestone in expanding our presence in a sector with strong growth prospects."
Additionally, a separate entity jointly owned by Mapletree Investments and Mapletree Industrial Trust will purchase an 80% interest while Digital Realty will retain a 20% interest in a joint venture on three hyperscale facilities in Ashburn, Virginia. The 80% stake to be acquired by Mapletree Investments and Mapletree Industrial Trust will be sold for $811 million, valuing these three assets at approximately $1 billion.
"These transactions represent an important step towards our goal of self-funding our growth and diversifying our sources of equity capital while shrinking our asset base and setting the stage for accelerating growth as the proceeds are redeployed into accretive investment opportunities," continued A. William Stein (pictured), chief executive officer, Digital Realty. "We are pleased to partner with the high-calibre team at Mapletree to effect a transaction that meets both companies' objectives, and we look forward to collaborating with Mapletree as joint venture partners and exploring additional opportunities together worldwide."
The transactions are due to close in late 2019 or early 2020, subject to the usual closing conditions. The company has confirmed that the proceeds from the transaction will be used to pay down debt and to fund future investment activity.